2. High Rate Lending Why Offer Benefits How to Implement GPS Lending to Higher Risk Members Monitoring the Risk

3. Why Offer Some members with sub 640 credit scores are very safe to loan to Those with low beacon due to medical judgment, an older missed payment, fraud, being new to the workforce, younger, lack of recent activity Many times these lower score members are safer than members with 600-660 beacon scores who previously were 740+

4. Benefits More loan interest = more profits An 18% loan to a person with a 613 credit score provides 6x the loan revenue as a 3% loan to an A+ member More Profits = Higher dividends, salaries, marketing budget More services, products, resources All these lead back to increased LOAN growth These loans will always be above CD rates Strengthens Member Relationships – More loans in the future to same members as youve helped when no one else would Helps fulfill the Credit Union industry mission of serving the underserved

5. GPS Lending to Higher Risk Members Culture Pricing/Incentives Marketing Creativity Continuous Monitoring

6. How to Implement cont. Culture Loan departments realize they need C, D, & E borrowers to increase net interest margin A credit score persons worth Understand you have to closely look at the reasons for the lower score such as time at job, amount of trade lines, and timing of any negative information Determine the right term and the right amount Minimize the downside (loan to value, direct deposit, etc)

7. How to Implement cont. Pricing/Incentives Align reward and risk Align the interest rate the Credit Union receives with the amount of risk it is taking by loaning to certain credit tiers D & E credit tiers typically fall within a 15 – 18% rate to offset risk exposure the Credit Union is taking on If using indirect, consider paying a higher dealer incentive for B & C loans than A & A+

8. How to Implement cont. Marketing Similar to younger adults who use non-traditional media Local sale papers (Penny Saver, Apartment Guides, etc) Radio Social Media such as Facebook, Twitter, or your CU Website Word of mouth – people tend to spend time with like minded persons Used Auto Dealers will push these people to you since they cant get them financed elsewhere

9. How to Implement cont. Creativity Rate Reduction – May consider a rate reduction for each year or six months the member has 0 late payments Incorporate with a Credit Builder Program Helps in selling Credit Union Repos faster as most purchasers dont have the best credit

10. How to Implement cont. Continuous Monitoring GPS Tracking and starter disabling devices 60+ day delinquency report comparing it to prior month, quarter, and year looking at trends Always working a 10 – 60 day delinquency report Slice up info based on credit tier and product to look at charge off percentage and delinquency per dealer for indirect lending Monitoring loan revenue by credit tier (gross and net after charge offs)

11. Q & A